Monday, June 27, 2011

Indian diamond processors want early solution to Kimberly impasse

The Rs 2,50,000-crore Indian diamond processing industry is worried over the growing impasse within the Kimberley Process (KP), the global body legalising exports of rough diamond.

KP is a 27-member group consisting of producers and consumers of rough diamond. India, which processes diamond worth $15 billion annually, around 80 per cent of the rough variety mined globally, is a member of the bloc.

The impasse between the chair of KP and its members is over allowing Zimbabwe to export rough diamonds. The US and Canada say Zimbabwe is mining “blood diamonds” using inhuman practices, and hence should not be approved by KP.

It is the first attempt by Zimbabwe to export rough diamonds.

KP had earlier allowed Zimbabwe to export rough diamond, and at least two consignment reached the Dubai port. But, because it was not certified by the KP committee, the consignment is hanging with the Dubai government. Local diamantaires have already noticed migration of jewel lovers from diamond jewellery to pure gold jewellery due to rising cost of natural diamond. They fear that the ongoing battle within KP may increase prices of rough and polished diamond varieties, which may drive consumers further.

According to Sanjay Kothari, vice-chairman of the Gems and Jewellery Export Promotion Council (GJEPC), the apex trade body in the country, rough diamond prices have been rising 8-10 per cent almost every month since early this year, taking the overall increase to 35-40 per cent so far.

Factors like the absence of new mines and mining companies deciding to continue with low production may raise prices further in the coming months. Jewellery processors generally procure rough diamond in August to cut and polish to manufacture studded jewellery items for festivals like Dusshera, Diwali and the New Year.

“We, therefore, want the chairman and members of KP to sit for negotiation and resolve the rift through give and take. The government of Zimbabwe must agree to the KP certification process and members to agree sourcing rough diamond from these mines,” urged Praveen Shankar Pandya, chairman of Diamond India Ltd and managing director of Revashankar Gems Ltd.

In the last KP meeting on June 23 in Kinshasa, the chairman of the KP Committee, Mathieu Yamba Lapfa Lambang (Yamba), allowed exports of rough diamond from the compliant mining operations of Marange Resources and Mbada in Zimbabwe with immediate effect. The KP Committee requires all members to agree on an issue to pass a resolution unanimously to make it a law.

Yamba clarified in an order that in case the monitoring team, appointed by the KP Committee, did not arrive at a consensus, the chair of KP would resolve the matter. “Since the supply of rough diamond has become scarce due to limited exploration in the last decade and has the potential for further squeeze in coming years because of no identification of new mines, supply from Zimbabwe will ease tightness to a certain extent,” Pandya added.

Varda Shine, CEO of Diamond Trading Company (DTC), the marketing arm of De Beers which produces about 40 per cent of the world’s rough diamond supply, had earlier suggested the company’s sightholders should not participate in the sale of ‘blood diamonds’ until the rift got over. Zimbabwe currently produces rough diamond worth between $500 million and $600 million which can increase to even $1.5 billion in case official sale is allowed. India processes diamond worth $15 billion annually, around 80 per cent of the rough variety mined globally, and is ready to procure the entire quantity excavated in Zimbabwe.

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